Mall Vacancies At Six-Year High As Local Economies Stumble On Retail Slump

Retail vacancies at regional shopping malls have reached a six-year high - jumping to 8.4% in Q1 2018, the highest level since Q4 2012, according to real-estate data firm Reis Inc. which studies 77 metropolitan areas.

Furthermore, local neighborhood and community shopping centers in 41 of the 77 areas tracked by Reis experienced an increase in vacancies during the 12 months ending March 31.

The numbers show that bricks-and-mortar malls and shopping centers continue to be hurt by shifting consumer spending patterns, particularly the increasing use of online retail. Numerous department stores and other retailers that traditionally have been mainstays of shopping areas have been contracting or have failed.

Reis reported that retailers occupied 453,000 more square feet of shopping center space at the end of the first quarter than the fourth quarter of 2017, but that amount of “absorption” was the lowest for any quarter in more than five years. The completion of 712,000 square feet of new shopping center space also was “much lower” than average, Reis said. -Wall St. Journal

“The first quarter tends to see the lowest activity,” the Reis report said. “However, this was an unusually slow quarter for retail leasing and construction.”

The death of brick-and-mortar and its impact on jobs across the country comes as no surprise to anyone paying attention to the evolution of e-commerce and the convenience of various payment methods.

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Last September, Toys “R” Us Inc., the largest US "brick and mortar" toys retailer, filed for bankruptcy. In March, it moved to liquidate its inventory, close stores nationwide, and finally shut down Toys R Us and Babies R Us websites - leaving shoppers with a thank-you note.

And while everyone likes to point their finger at Amazon - the retail apocalypse can't be tied to just one catalyst. Massive excess capacity, perpetually over-leveraged capital structures and a constant lack of capital investment have doubtless contributed to the decline.

Meanwhile, given the number of real estate delinquencies sprinkled around the country, the store closure counts above will undoubtedly only continue to grow.

Of course, the wave of retail failures is a direct hit to an industry that is the largest employer of young Americans and those at the low end of the income spectrum with retail employment drastically lagging overall private job growth.

President Trump renewed his long-standing attack on Amazon last week - tweeting "They pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!"

I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!

That said, Amazon has previously pointed out that it collects tax on its own inventory in all 45 states that require such a tax.

As we reported earlier, Trump is "obsessed with Amazon," a source told Axios. "Obsessed", and added that Trump has allegedly talked about changing Amazon’s tax treatment because he’s worried about mom-and-pop retailers being put out of business. Another Axios source said that POTUS has "wondered aloud if there may be any way to go after Amazon with antitrust or competition law."

Trump’s deep-seated antipathy toward Amazon surfaces when discussing tax policy and antitrust cases. The president would love to clip CEO Jeff Bezos’ wings. But he doesn’t have a plan to make that happen. -Axios

When Trump previously discussed the idea inside the White Hose, Gary Cohn had explained that Amazon is a benefit to the Postal Service, which has seen mail volume plummet in the age of e-mail. “Trump doesn’t have Gary Cohn breathing down his neck saying you can’t do the Post Office shit,” a Republican close to the White House said. “He really wants the Post Office deal renegotiated. He thinks Amazon’s getting a huge fucking deal on shipping.” -Vanity Fair

Of the areas tracked by Reis which have been hit the hardest by the retail apocalypse, Indianapolis and Tacoma, WA had the highest year-over-year vacancy increases.

Syracuse and Cleveland had the largest decrease in retail mall vacancies, falling one percentage point to 12% at the end of the first quarter. Cleveland came in second, dropping 0.7 percentage point to 14.6%: both of these suggest a risign tide of service unemployment.

Jobs in the retail sector are the most prolific in America, employing 4.3 million workers as salespeople and 3.3 million workers as cashiers. (source) The current store closures mean the end of employment for tens of thousands of workers.

All in all, the collapse of the retail industry could, at some point, put the livelihoods of more than 7 million people in jeopardy. Perhaps "doomsaying" economists (such as, gasp, Peter Schiff) are correct when they warn that another Great Depression is upon us, but with the fake stock markets near all time highs, everyone is too distracted to notice...